Car­bon trade tak­ing he

The mar­ket for off­set per­mits is help­ing coun­tries hit Paris Agree­ment tar­gets, finds Jillian Am­brose

The Sunday Telegraph - Money & Business - - Business -

The po­lit­i­cal bat­tle against the world’s rising green­house gas emis­sions has found an un­ex­pected ally – in car­bon pol­lu­tion it­self. By putting a price on car­bon emis­sions, and har­ness­ing the pow­ers of mar­ket forces, the world’s bur­geon­ing trade of car­bon off­set per­mits is gain­ing trac­tion as a ma­jor weapon in the bid to keep global tem­per­a­tures from rising.

The value of en­ergy com­modi­ties in­clud­ing oil, gas and coal may have more than dou­bled in re­cent years, but it is the off­spring of the fos­sil fuel in­dus­try which is emerg­ing as the next gen­er­a­tion com­mod­ity to watch.

In the last year alone, the value of Europe’s flag­ship car­bon mar­ket has tripled. Fresh anal­y­sis shows that the price could be set to dou­ble again within the next three years and quadru­ple by the end of the next decade. The World Bank estimates that car­bon mar­kets, and sim­pler car­bon tax regimes, have a value of well over $82bn (£62bn).

“Gov­ern­ments at all lev­els are start­ing to see the ef­fec­tive­ness of car­bon pricing in their ef­forts to cut harm­ful car­bon pol­lu­tion while also rais­ing rev­enues for cli­mate and other poli­cies, in­clud­ing en­vi­ron­men­tal ac­tion,” said John Roome, a se­nior di­rec­tor at the World Bank.

“As coun­tries take stock of their Paris Agree­ment com­mit­ments and set a path to­wards in­creased am­bi­tion, car­bon pricing mech­a­nisms with ro­bust pricing lev­els are prov­ing to be essen­tial el­e­ments of the tool­kit,” he added. It is a rare phe­nom­e­non in the bat­tle to tackle cli­mate change: a tact which has won sup­port across the board, from clean en­ergy de­vel­op­ers and Big Oil, to Left-lean­ing en­vi­ron­men­tal­ists and pro-mar­ket econ­o­mists.

Royal Dutch Shell and min­ing gi­ant Rio Tinto have both joined the work car­ried out by the Car­bon Pricing Leadership Coali­tion. Ben Van Beur­den, Shell’s chief ex­ec­u­tive, has leant the mar­ket his per­sonal sup­port.

“Such mech­a­nisms have the ef­fect, over time, of pulling both con­sumers and in­dus­try to­wards low-car­bon prod­ucts,” he said. “Not least among these would be car­bon cap­ture and stor­age fa­cil­i­ties. Un­til there is a mar­ket for car­bon, the eco­nomic jus­ti­fi­ca­tion for such fa­cil­i­ties is hard to make.”

BP’S Bob Dud­ley be­lieves car­bon mar­kets could be the third pil­lar in meet­ing the Paris Agree­ment, along­side lowering the car­bon in­ten­sity of en­ergy and in­creas­ing efficiency. “It’s our be­lief that among the most mean­ing­ful ac­tion that gov­ern­ments could take is to bring about clear, sta­ble pricing frame­works that will in­cen­tivise low-car­bon choices and change the be­hav­iour of in­di­vid­u­als, of busi­nesses and of gov­ern­ments,” he said.

The emer­gence of car­bon trad­ing as a vi­able fi­nan­cial mech­a­nism to spur low-car­bon in­vest­ment was al­most unimag­in­able a few years ago amid fears that the Eu­ro­pean Union’s Emis­sions Trad­ing Sys­tem was in its death throes. The world’s first ma­jor car­bon trad­ing project was brought to its knees by deep struc­tural flaws and stran­gled by bu­reau­cratic in-fight­ing. At the same time, the strug­gling mar­ket bat­tled a multi-bil­lion euro fraud scan­dal.

It was an in­aus­pi­cious start for a mar­ket in­tended to save the world from cli­mate change, but af­ter a hard-fought EU re­cov­ery deal it could pro­vide a tem­plate for other blocs to fol­low. Un­der the scheme, Eu­ro­pean com­pa­nies with the big­gest car­bon foot­prints buy and sell a fi­nite num­ber

‘Gov­ern­ments are start­ing to see the ef­fec­tive­ness of car­bon pricing in ef­forts to cut harm­ful pol­lu­tion’

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